SEC News Digest

Commission announcements

The Securities and Exchange Commission's Office of the Chief Accountant is accepting applications for Professional Accounting Fellow (PAF) positions to begin the summer of 2012. The PAF program, which began in 1972, is designed to provide participating fellows with outstanding opportunities for public service to investors, personal development, and career advancement. During their fellowship (typically a 2 year term), the successful candidates will be involved in the study and development of rule proposals under the federal securities laws, liaison with accounting, auditing and other professional standard-setting bodies, and consultation with registrants on reporting matters. The Office of the Chief Accountant plans to select candidates for the following position:

The Office of the Chief Accountant's Accounting Group would like to select up to two candidates with significant experience in the application of US GAAP to banking and financial institutions. Areas of specialty may include, but are not limited to allowance for loan losses, structured transactions (e.g. asset backed financings), investment company accounting, derivatives and hedging activities, and debt versus equity classification.

Interested applicants should submit:

a resume;

at least two letters of recommendation from non-relatives; and

an eight to twelve page essay

Applicants are required to submit an essay that they have prepared on their own directly related to a current accounting topic. Applicants are encouraged to select any current accounting topic in which they possess expertise, and includes consideration of one or more interrelated policy-level issues.

The requested items should be submitted on or before June 1, 2012, to the Chief Accountant of the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C., 20549. In addition to the hard copy, applicants should also e-mail the requested items to oca@sec.gov with “PAF Application” in the e-mail subject line. Inquiries about the program may be addressed to the attention of Laura McCracken or Stephanie Dambaugh in the Office of the Chief Accountant at (202) 551-5302 and (202) 551-4388, respectively.

The Commission's policy of affording equal employment opportunity to all interested candidates will be followed.

The Securities and Exchange Commission today announced it has charged a New York-based investment adviser with defrauding investors in five offshore funds and using some of their money to buy himself a multi-million dollar beach resort property on Long Island.

The SEC alleges that Brian Raymond Callahan of Old Westbury, N.Y., raised more than $74 million from at least two dozen investors since 2005, promising them their money would be invested in liquid assets. Instead, Callahan diverted investor money to his brother-in-law’s beach resort project that was facing foreclosure, and in return received unsecured, illiquid promissory notes. Callahan also used investor funds to pay other investors and make a down payment on the $3.35 million unit he purchased at his brother-in-law’s real estate project.

According to the SEC’s complaint filed yesterday in federal court in Islip, N.Y., Callahan operated the five funds through his investment advisory firms Horizon Global Advisors Ltd. and Horizon Global Advisors LLC. He used the promissory notes to hide his misuse of investor funds. The promissory notes overstated the amount of money diverted to the real estate project. For instance, in 2011, Callahan received $14.5 million in promissory notes in exchange for only $3.3 million he provided to his brother-in-law. The inflated promissory notes allowed Callahan to overstate the amount of assets he was managing and inflate his management fees by 800 percent or more.

“Callahan misled investors in his funds with false promises, and he enriched himself at their expense when he diverted fund assets for his personal use and pocketed inflated management fees,” said Antonia Chion, Associate Director in the SEC’s Division of Enforcement.

According to the SEC’s complaint, Callahan refused to testify in the SEC’s investigation and recently informed investors about the investigation, but gave false assurances that no laws had been broken. Callahan also misled investors by not disclosing that in 2009, the Financial Regulatory Industry Authority barred him from associating with any FINRA member.

The SEC charges Callahan and his advisory firms with violating federal antifraud laws, specifically Sections 17(a)(1), (2) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a), (b) and (c) thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC is seeking preliminary and permanent injunctions against Callahan and his firms, return of ill-gotten gains with interest, and financial penalties.

At the SEC’s request, and after a court hearing yesterday, the court granted a temporary restraining order freezing the assets of Callahan and his advisory firms, enjoining them from violating the antifraud provisions, and granting other emergency relief.

The SEC’s investigation has been conducted by Holly Pal, Linda French, Osman Handoo, Ann Rosenfield, Natalie Lentz and Lisa Deitch of the SEC’s Division of Enforcement. The SEC’s litigation is being led by Dean Conway.

The Commission acknowledges the assistance of the British Virgin Islands Financial Services Commission and the Bermuda Monetary Authority. (Press Rel. 2012-38)

Enforcement proceedings

In the Matter of James Clements

On March 6, 2012, the Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions (Order) against James Clements. The Order finds that on February 7, 2012, a final judgment was entered against Clements, permanently enjoining him from future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Sections 15(a) and 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5, in the civil action entitled Securities and Exchange Commission v. James Clements & Zeina Smidi, Civil Action Number 0:11-60673-CIV-WPD, in the United States District Court for the Southern District of Florida.

The complaint alleged that from 2005 until the end of 2007, Clements and his partner operated a Ponzi scheme that offered investors guaranteed monthly returns. Clements falsely told investors MRT used investor proceeds to trade foreign currencies and guaranteed monthly returns of up to 11%. In June 2007, Clements told account managers MRT would no longer trade foreign currencies; instead, Clements falsely claimed that MRT was working with the best Swiss banks and advisors, allowing investors to roll over their existing investment and make future ones into high-yield, fixed-rate savings accounts. Clements and his partner, however, actually operated a Ponzi scheme with investors’ money. Clements and his partner siphoned approximately $3 million of MRT investor money to their personal bank accounts, and paid out approximately $3 million for travel, expenses, and luxury items.

Based on the above, the Order bars Clements from association with any broker, dealer, investment adviser, municipal securities dealer, or transfer agent. The Order also bars Clements from participating in any offering of a penny stock. Clements consented to the issuance of the Order without admitting or denying any of the findings in the Order, except he admitted the entry of the injunction. (Rel. 34-66516; File No. 3-14785)

Securities and Exchange Commission Orders Hearing on Registration Suspension or Revocation Against Seven Public Companies For Failure to Make Required Periodic Filings

Today the Commission instituted public administrative proceedings to determine whether to revoke or suspend for a period not exceeding twelve months the registrations of each class of the securities of seven companies for failure to make required periodic filings with the Commission:

Toolex International N.V.

topjobs.net PLC

Tribridge Enterprises Corp. (n/k/a Northern Lion Gold Corp.) (NLGCF)

Tropika International Ltd.

Tsunami Media Corp.

T.Z.F. International Investments, Inc.

Vantage Enterprises Corp. (n/k/a African Gemstones Ltd.)

In this Order, the Division of Enforcement (Division) alleges that the seven issuers are delinquent in their required periodic filings with the Commission.

In this proceeding, instituted pursuant to Exchange Act Section 12(j), a hearing will be scheduled before an Administrative Law Judge. At the hearing, the Administrative Law Judge will hear evidence from the Division and the Respondents to determine whether the allegations of the Division contained in the Order, which the Division alleges constitute failures to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder, are true. The Administrative Law Judge in the proceeding will then determine whether the registrations pursuant to Exchange Act Section 12 of each class of the securities of these Respondents should be revoked or suspended for a period not exceeding twelve months. The Commission ordered that the Administrative Law Judge in this proceeding issue an initial decision not later than 120 days from the date of service of the order instituting proceedings. (Rel. 34-66519; File No. 3-14786)

Jury Returns Verdict of Liability on All Claims Against Two Former CFO’s of InfoUSA, Inc, Rajnish K. Das and Stormy L. Dean

The U.S. Securities and Exchange Commission announced today that on March 1, 2012, a jury in Omaha, Nebraska returned a verdict of liability on all claims against former chief financial officers Rajnish K. Das and Stormy L. Dean. Das and Dean were former executives of infoUSA, Inc., a database marketing company headquartered in Omaha, Nebraska. The trial was presided over by U.S. District Judge Laurie Smith Camp. In its complaint, the Commission charged Das and Dean with violations of Sections 10(b), 13(b)(5), and 14(a) of the Securities Exchange Act of 1934; Rules 10b-5, 13a-14, 13b2-1, 13b2-2, 14a-3, and 14a-9 thereunder; and aiding and abetting violations of Exchange Act Sections 13(a) and 13(b)(2), and Rules 12b-20, 13a-1, and 13a-13 thereunder. At the trial, the Commission argued that Das and Dean assisted former chief executive officer Vinod Gupta in looting infoUSA, Inc. by authorizing Gupta’s use of company funds to pay for his lavish lifestyle. The Commission argued that Gupta used company funds to pay for his personal expenses including private jet flights, yacht expenses, private club memberships, credit card expenses, and expenses associated with his homes and cars. The Commission argued that Das and Dean signed and certified Info’s false public filings which underreported Gupta’s executive compensation and related party transactions. After the 10-day trial, the jury deliberated for approximately two hours before rendering its verdict. The Commission expects to file a motion for injunctive and other remedial relief based upon the jury’s verdict. [SEC v. Rajnish K. Das and Stormy L. Dean, Civ. No. 8:10-CV-00102 (D. Nebraska)] (LR-22276)

Investment company act releases

Kohlberg Capital Corporation

A notice has been issued giving interested persons until March 26, 2012, to request a hearing on an application filed by Kohlberg Capital Corporation (Company), for an order under Section 6(c) of the Investment Company Act of 1940 (Act) granting an exemption from Section 12(d)(3) of the Act. The order would permit the Company and certain wholly-owned holding companies to continue to hold a greater than 50% equity interest in certain of their subsidiaries that will be registering as investment advisers under the Investment Advisers Act of 1940. (Rel. IC-29975 - March 5)

Self-Regulatory Organizations

Immediate Effectiveness of Proposed Rule Changes

A proposed rule change filed by the National Stock Exchange, Inc. (SR-NSX-2012-04) to amend the NSX Fee and Rebate Schedule has become effective under Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66511)

The Commission issued notice of filing and immediate effectiveness of a proposed rule change (SR-BX-2012-011) filed by NASDAQ OMX BX, Inc. under Rule 19b-4 of the Securities Exchange Act of 1934 to amend Chapter V, Section 26 of the BOX Rules. Publication is expected in the Federal Register during the week of March 5. (Rel. 34-66512)

Securities Act Registrations

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.